Controversial California grocery store bill could kill coupon programs, advocates warn

Legislation pushed by a Democratic lawmaker could hurt Californians struggling with the cost of living even more by doing away with grocery discounts, opponents are warning.

Grocery stores and retailers beefed up their opposition this month and launched a campaign to derail a bill, AB 2564, that would essentially prohibit surveillance pricing. Surveillance pricing is when personal data is used to charge someone different prices.

Personal information gathered through apps, web browsing history, and data brokers can inform pricing algorithms, for instance, on income bracket or shopping behavior of a consumer.

This is at least the second attempt by Assemblymember Chris Ward to crack down on the practice. He withdrew a similar bill last year, but this year, his push is seeing momentum across the nation as affordability becomes a key issue for voters.

Backers of the legislation say that banning the practice will protect consumers from higher prices.

“The last thing anyone needs is to be charged higher prices based on their personal data,” said Ward in March.

“This practice hits hardest for low-income individuals and shoppers and those with limited shopping options.”

However, grocery stores say the idea will backfire, claiming there will be fewer discounts and choices for Californians. Personalized loyalty programs and discounts rely on that same type of data gathering.

“Families are stretching every dollar right now. The last thing they need is Sacramento making that harder,” said Rachel Michelin, president of the California Retailers Association.

“Families are already dealing with higher prices almost everywhere they turn. They rely on weekly specials, digital coupons, and loyalty programs to stretch their household budgets,” she added. “This is a solution looking for a problem, and it moves California in exactly the opposite direction of affordability.”

The legislation does provide some exceptions to the ban, such as if the discounted price is “publicly available”.

If the discounted price is based on collected digital data, it would have to be based on “publicly disclosed criteria” that anyone can meet — such as signing up for a newsletter, be given to a broad group such as teachers and not one individual, and it has to be through a rewards or membership program.

Those are hurdles, however, that will effectively discourage grocers from offering personalized discounts, critics said.

“AB 2564 creates a new legal framework that many businesses believe will be difficult to navigate. For large companies, that means higher compliance costs,” the new opposition coalition Californians for Consumer Affordability said.

“For many small businesses, it could mean deciding it’s simply not worth the risk to continue offering certain discount programs.”

The retailers association argued the bill should only focus on prohibiting price increases and claimed they’ve been unable to get their suggestions adopted.

Ward said in a legislative hearing last month that he’s continuing to have discussions around the issue and he also doesn’t want to hurt discounted programs. The bill has until end of August to be sent to the governor.

Consumer advocates like Consumer Reports said they’ve pushed back because they don’t want discounts to be a “backdoor” to personalized pricing, which is why those transparency requirements are in place.

“We wanted to make sure that we were not using certain language in the bill that was gonna create some kind of a backdoor opportunity where the way that they were able to afford discounts would still somehow and unintentionally be captured by the bill,” Ward said. “I don’t want that either.”

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